New York’s prevailing wage lawA cost-benefit analysis

By Russell Ormiston, Dale Belman, and Matt Hinkel • November 1, 2017

Summary: Enacted in 1897, New York state's prevailing wage law requires thatcontractors pay their workers no less than the “prevailing” wage and benefit levels withinthe local construction market. In addition to its ethical underpinnings, the law also has aneconomic justification: it protects New York construction workers from being undercut bylow-wage, often out-of-state contractors that may covet a large government constructioncontract and whose presence would take away jobs and erode working conditions forlocal residents.

• Washington, DC View this working paper at epi.org/137294

SECTIONS

1. Executive summary • 1

2. Introduction • 4

3. Costs • 5

4. Benefits • 12

5. Concluding discussion• 24

About the authors • 26

Endnotes • 29

References • 33

A working paper from the Economic Policy Institute, lastupdated February 14, 2018

Executive summaryBeyond its role as a regulator, the New York stategovernment has a critical function in the state’sconstruction industry: one of its largest customers. With a2018 fiscal year capital budget of $14.5 billion, the policiesand practices of the state government—as aconsumer—significantly influence local construction labormarkets. This presumably puts state lawmakers in thedifficult position of having to balance two ethicalconsiderations that, on the surface, appear to be mutuallyexclusive: the need to minimize taxpayer costs against theresponsibility of ensuring fair wages, benefits, and safeworking conditions for its residents on public constructionprojects.

To ensure that New York state fulfills the latterconsideration, contractors working on state-fundedgovernment construction projects must adhere to thetenets of New York’s prevailing wage law. Enacted in 1897,this state policy requires that contractors pay their workersno less than the “prevailing” wage and benefit levels withinthe local construction market. In addition to its ethicalunderpinnings, the law also has an economic justification: itprotects New York construction workers from beingundercut by low-wage, often out-of-state contractors thatmay covet a large government construction contract andwhose presence would take away jobs and erode workingconditions for local residents.

State prevailing wage laws across the country haveincreasingly been assailed by those who appeal tolawmakers’ other responsibility—minimizing taxpayercosts—in an attempt to weaken or repeal these policies.These nationwide campaigns are built almost entirely upona single argument: higher wages must equate to highertaxpayer costs. This narrative is simple, and its simplicityhas made it a powerful political position that has beensuccessfully exploited to overturn state laws in Indiana(2015) and West Virginia (2016). And with a recentpublication by the Empire Center (McMahon and Gardner2017), it has become apparent that some in New York will

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attempt to pitch the same narrative to state lawmakers.

There’s one problem. According to the most advanced economic research on stateprevailing wage laws, the simple narrative largely isn’t true.

To separate fact from fiction as it relates to New York’s prevailing wage law, this reportprovides a thorough cost-benefit analysis of state policy relying extensively onindependent, peer-reviewed research. As summarized in this report, academic economistsfrom around the country have made prevailing wage laws a research priority over the last15 years. In study after study, economists have found no evidence that these laws havehad any significant cost effects on the biggest drivers of New York’s capital budget:highways and institutional buildings (e.g., schools).

How could the simple narrative be so wrong?

It turns out that the narrative relies on a subtle, yet egregious, logical fallacy that assumesthat the only way that a contractor can minimize labor costs is by reducing the cost perhour of each worker. This is false. In any industry, an employer can also minimize laborcosts by reducing turnover and/or the number of labor hours required. In construction, thiswould mean using higher wages to attract and hire the industry’s most productive workersand providing them with the most advanced equipment and technology. This high-wage,high-skill approach to minimizing cost is referred to as paying “efficiency wages,” a well-established strategy that is discussed in any introductory labor economics course. In theretail industry, this approach is what allows high-wage Costco and Wegmans to competewith low-wage Wal-Mart. Both paths can minimize costs, and it has been demonstratedconvincingly in the academic research that high-wage contractors are able to exploit thesecost offsets to place bids on public construction projects that are competitive with—if notbetter than—those of low-wage contractors.

In short, opponents of prevailing wage laws have shaped the political narrativesurrounding these laws by, in part, successfully creating and defeating an implicit strawman argument that prevailing wage laws increase the hourly cost per worker. That may betrue. But the fundamental policy question is whether state prevailing wage laws increasetotal construction costs. From this perspective, the academic literature is clear andunequivocal: state prevailing wage laws have no effect on the biggest drivers of a state’sconstruction budget. Suggestions to the contrary, as found in reports authored by thelaws’ opponents, consistently (and conveniently) ignore the academic research andinstead rely on an empirical methodology that has been widely discredited amongeconomists.

Opponents of state prevailing wage laws across the country have also shaped thenarrative on these laws by focusing almost entirely on the presumed costs of the policy;recent analyses of New York’s policy by the Center for Urban Real Estate (Vitullo-Martin2012) and the Empire Center (McMahon and Gardner 2017) follow a similar approach. Thissingle-minded focus on construction costs has altered political discussion about prevailingwage laws in a powerful way: it has obscured all attention away from the benefits thatthese laws offer a state and its residents. That is unfortunate, as state prevailing wage lawshave been demonstrated to improve the lives of workers, communities, contractors and

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construction consumers.

First and foremost, New York’s prevailing wage law strengthens and protects the state’sblue-collar middle class. By ensuring that New York state residents working on publicconstruction projects receive fair pay and benefits, state lawmakers are directlyresponsible for creating and promoting the types of blue-collar middle-class jobs that havelong represented the backbone of communities throughout New York state. This not onlybrings economic and personal security to New York families and communities, but it alsoadds hundreds of millions of dollars to the state’s economy and substantially increasesNew York’s state and local tax revenues.

New York’s prevailing wage law is also one of the few effective policy levers that promotea clear pathway to the middle class for non–college educated workers. As described inthis report, New York state residents without a college degree have encountereddwindling economic opportunities in recent decades, and most jobs expected to becomeavailable to them in the near future offer poverty-level wages or below. A career inconstruction is an exception, as this is one of the few remaining industries where workerscan earn a sufficient paycheck and receive health and pension benefits without a collegedegree. New York’s prevailing wage law promotes these middle-class career opportunitiesby incentivizing contractors to hire apprentices enrolled in state-sanctioned programs,many of which only require a high school diploma for admission. In doing so, statelawmakers are directly providing opportunities for inexperienced workers to acquire theon-the-job training necessary to develop into skilled tradespeople and the next generationof New York’s blue-collar middle-class.

The benefits of lawmakers’ support for apprenticeship programs through New York’sprevailing wage law also extend to the state’s contractors and construction consumers.Contractors have bemoaned skill shortages in construction for decades. While bona fideregional skill shortages can typically be resolved by increasing wages, contractors’ oft-used solution to a perceived skill shortage—recruiting and employing available out-of-region workers—represents a missed opportunity for policymakers interested ingenerating new jobs for local residents. Prevailing wage laws are one of the few effectivepolicy levers available to promote on-the-job training and apprenticeships, therebydeveloping a skilled, in-state labor force capable of powering New York’s economicgrowth.

New York’s prevailing wage law is also consistent with the obligation of state and localgovernments to prioritize the bids of honest, fair-dealing contractors whose workplacepractices adhere to labor and employment law. Under the policy, contractors working onstate-funded projects must submit a project-wide certified payroll report that includesemployees’ names, Social Security numbers, pay rates, and number of hours. Theprospect of more stringent government oversight discourages bids from unscrupulouscontractors whose competitiveness depends on illegal, but-cost saving labor strategies.By rooting out unethical actors, prevailing wage laws also advantage contractors with agreater commitment to workplace safety, as the academic research demonstrates thatfatal and nonfatal injury rates in construction are substantially lower in states with theselaws.

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In sum, state lawmakers overseeing New York’s construction industry must weigh twoethical responsibilities that, on the surface, appear to be mutually exclusive: the need tominimize taxpayer costs and the responsibility of ensuring fair wages, benefits, and safeworking conditions for its residents on public construction projects. A critical review of thecurrent academic research in this report indicates that New York’s prevailing wage lawmay offer policymakers the opportunity to fulfill both responsibilities. On the biggestcomponents of the state’s construction budget, the consensus of academic studies is thatthe policy has little to no effect on taxpayer costs. There is also considerable evidence thatthe policy raises the standard of living of a state’s residents, improves workplace safety,and offers a clear path to the middle class for New York state residents without a collegedegree. Taken together, research by independent, academic economists indicates thatNew York’s prevailing wage law is a uniquely valuable component of state policy thatsimultaneously uplifts residents and communities while imposing minimal, if any, cost ontaxpayers.

IntroductionBeyond its role as a regulator, the New York state government has a critical function in thestate’s construction industry: one of its largest customers. With a 2018 fiscal year capitalbudget of $14.5 billion, the policies and practices of the state government—as aconsumer—significantly influence local construction labor markets. This presumably putsstate lawmakers in the difficult position of having to balance two ethical considerationsthat, on the surface, appear to be mutually exclusive: the need to minimize taxpayer costsagainst the responsibility of ensuring fair wages, benefits and working conditions for itsresidents on public construction projects.

To ensure that New York state fulfills the latter consideration, contractors working on state-funded government construction projects must adhere to the tenets of New York’sprevailing wage law. Enacted in 1897, this state policy requires that contractors pay theirworkers no less than the “prevailing” wage and benefit levels within the local constructionmarket. In addition to its ethical underpinnings, the law also has an economic justification:it protects New York construction workers from being undercut by low-wage, often out-of-state contractors who may covet a large government construction contract and whosepresence would take away jobs and erode working conditions for local residents.

As states have continued to struggle to balance their budgets following the GreatRecession, opponents have increasingly appealed to lawmakers’ otherresponsibility—minimizing taxpayer costs—in an attempt to weaken or repeal prevailingwage laws. These nationwide campaigns are built almost entirely upon a single argument:higher wages must equate to higher taxpayer costs. This narrative is simple, and itssimplicity makes it a powerful political position.

The argument is indeed simple. But is it true?

It turns out that the simple narrative is too simple. An emerging consensus from theacademic research reveals that, for many public construction projects, prevailing wage

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laws do not increase taxpayer costs (Duncan and Ormiston 2018). If this seemscounterintuitive, consider that the simple wage-cost narrative ignores basic dynamicswithin construction markets: high-wage contractors attract and employ the highest skilledand most productive workers while using the industry’s most advanced equipment andtechnology. These labor cost offsets are substantial and allow high-wage contractors toplace bids for public construction projects that are competitive with—if not betterthan—those of low-wage, low-skill contractors (Atalah 2013a).

Whether prevailing wage policies allow state lawmakers to simultaneously fulfill both oftheir ethical obligations—to taxpayers and workers—represents a complicated publicpolicy question. While the academic research cited above suggests that it does, anydefinitive conclusion about the answer for New York requires a more thoroughexamination of the state’s prevailing wage law than has been provided elsewhere. Thisreport offers a detailed analysis of the broad array of costs and benefits of state prevailingwage laws in the context of New York’s state capital budget, emphasizing the findings ofacademic, peer-reviewed research.

CostsNationwide political campaigns by opponents of state prevailing wage laws are typicallyaccompanied by partisan reports featuring projections about how much a state will saveby repealing the policy. These estimates are typically enormous. Political efforts to weakenthe law in New York state are no different, as a 2017 report by the Empire Center proclaimsthat the state’s prevailing wage law is costing New York taxpayers an extra $400 millionannually (McMahon and Gardner 2017). However, when viewed through the lens of themost advanced academic research, it becomes clear that these reports aremethodologically defective and offer estimated cost savings that are wildly optimistic.

Academic economists from around the country have made the potential cost impact ofprevailing wage laws a research priority over the last 15 years. Numerous studies haveanalyzed the policy’s effect on public construction costs in three areas of significantgovernment expenditure: highways, schools, and affordable housing. To demonstrate theapplicability of the academic research to New York state, this report will provide a briefoverview of these studies through the lens of the state’s fiscal year 2018 capital budget.1

HighwaysNew York State is projected to spend $5.6 billion on highways, bridges, and othertransportation projects in fiscal year 2018, accounting for nearly 40 percent of the state’scapital budget. The Department of Transportation will oversee construction projectswhose value will be more than four times that of any other state agency. As a result, anyargument that prevailing wage laws substantially increase the state’s construction budgetis severely weakened if it is shown that the policy has no impact on transportationspending.

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This is exactly the conclusion reached by Duncan (2015a), the definitive academic studyon the relationship between prevailing wage laws and transportation spending. In ananalysis of highway maintenance costs in Colorado between 2000 and 2011, the authordiscovered that resurfacing projects on state-funded intrastate highways and federallyfunded interstate highways were required to be built to identical standards. Contractorsbidding on interstate projects, however, encountered one additional requirement: federalprevailing wage law (i.e., the Davis-Bacon Act).2 In contrast, intrastate projects wereexempt from prevailing wage policy since Colorado had never passed such a law togovern state-funded construction. This created a perfect “natural experiment” for theauthor to examine the cost impact of prevailing wage.

Analyzing data on 132 highway resurfacing projects, Duncan (2015a) applied a standardregression model to account for factors that may have affected a project’s complexity andcost (e.g., location, type of terrain). The results demonstrated that there was not anystatistically significant cost differential between highway projects covered by prevailingwage and those without such requirements. In a follow-up study, Duncan (2015b)expanded the analysis to examine whether bids on 91 resurfacing projects were moreaggressive when contractors switched from federal projects to less-regulated stateprojects; the results again failed to find any evidence suggesting that prevailing wagepolicy had any statistically significant impact on contractor bids.3

While not an extensive literature, the current research on prevailing wage laws offerscompelling evidence that contractors on highway resurfacing projects are able to offsetthe higher hourly labor costs by employing the most skilled workers and using the mostadvanced technologies. More broadly, it would be unreasonable to expect that prevailingwage laws would increase costs on more complicated transportation projects (e.g.,bridges, tunnels) given that high-wage, high-skill contractors would presumably have evenmore of an advantage on those projects compared to highway resurfacing. Consideringthat New York state is spending nearly 40 percent of its capital budget on transportationprojects, the absence of any cost effect attributable to prevailing wage in this constructionarea substantially weakens claims that the state’s prevailing wage law has a significanteffect on taxpayer costs.4

SchoolsEconomists have learned the most about state prevailing wage laws over the last 15 yearsby studying their effects on public school construction costs. School construction offersresearchers an ideal environment to study the cost impact of prevailing wage, as detaileddata can be collected on a large number of projects that are quite comparable in theirdesign and construction. Using regression analysis, economists are able to control forunique aspects of each school (e.g., square feet, number of stories, high school vs.elementary school) and thus conduct an “apples to apples” comparison of the costdifferential between schools based on whether such work was covered by prevailingwage policy. Regression unambiguously represents “best practices” among researchers inthis area, and it has been the chosen methodology in nine studies—all five academicarticles and four additional non-academic papers—published on the subject over the past

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two decades.5

The results of these studies offer a clear consensus: state prevailing wage laws do notaffect public school construction costs. In eight of the nine studies, the researchers failedto find a statistically significant link between prevailing wage policy and increased costs.6

This includes the largest studies on the topic, as Azari-Rad, Philips, and Prus (2002, 2003)examined over 4,600 schools built nationwide between 1991 and 1999 and failed to findany evidence that the presence or relative strength of a state’s prevailing wage law had aneffect on school construction costs.7

The ability of high-wage contractors to entirely offset the hourly labor costs attributable toprevailing wage laws on school construction projects is clearly demonstrated by Atalah(2013a). After Ohio exempted schools from its prevailing wage law in 1997, the authorexamined 8,093 bids on public school construction projects in the state between 2000and 2007. Comparing the bid cost per square foot between union contractors—whopresumably pay the highest local wages—and nonunion contractors, the author found nostatistically significant difference between bids statewide. The only significant differenceoccurred in an examination of southern Ohio, where the author found that bids fromnonunion contractors were considerably higher than their union counterparts. Given thatcontractors were not operating under the requirements of a prevailing wage law, it isrevealing that high-wage contractors were just as competitive—if not morecompetitive—on cost than low-wage contractors. The results provide convincing evidencethat contractors are able to offset the wage differentials attributable to prevailing wage byemploying the most skilled and most productive workers and using the most advancedequipment and technology.8

The evidence offered by the academic research on school construction suggests thatstate prevailing wage laws do not affect taxpayer costs in this area. For New York, theimplications of this conclusion are far-reaching. In addition to the $589 million that thestate is projected to spend on K-12 public school construction projects in fiscal year 2018,it would be reasonable to expect that these findings would also be applicable forconstruction work on comparable institutional projects; this would most specifically includethe $1.5 billion that the state has set aside for higher education, which accounts for over 10percent of its capital budget. Finally, this research is likely to be of considerable interest tolocal governments that devote a considerable portion of their capital budget to K-12construction spending and require contractors to pay their workers a prevailing wage oncity-funded projects. This certainly extends to New York City, whose fiscal year 2018capital budget includes $3.4 billion for K-12 school construction projects.

Affordable housingIn November 2016, New York Governor Andrew Cuomo announced a deal between realestate developers and union construction officials that revived the state’s 421a taxexemptions for new construction of affordable housing in New York City. The controversial,long-awaited Affordable New York Housing Program provides developers with a 35-yeartax abatement on housing projects. In return, developers must set aside a certain

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proportion of affordable apartments for 40 years and agree to pay construction workers anaverage compensation package of $45 or $60 per hour depending on the project’slocation in NYC. Developers are not required to employ union labor.

A growing consensus among researchers suggests that prevailing wage laws are likely toincrease construction costs on affordable housing projects. In an academic study of 205affordable housing projects in California between 1997 and 2002, Dunn, Quigley, andRosenthal (2005) found that prevailing wage laws at any level (federal, state, or local)increased costs between 9 percent and 11 percent using a standard regression model.9,10

In a more recent academic paper, Littlehale (2017) examined 286 affordable housingprojects in California from 2001 to 2011. Applying a more extensive regression model thanpreviously employed in the literature, the author estimated that prevailing wage lawsincreased construction costs on affordable housing between 5 percent and 7 percent.While prevailing wage laws were not the primary focus of Palm and Niemeier (2017), theirstudy of housing projects built between 2008 and 2016 in the state’s four largestmetropolitan areas suggested that the policy’s cost effects were between 15 and 16percent per unit. Finally, in a non-academic paper, the New York Independent BudgetOffice (NYC IBO 2016) examined 211 projects in New York City and concluded that federalDavis-Bacon regulations added 23 percent to the cost of construction. While the estimatefrom the New York report is consistent in direction with the two academic papers, itsdeviation in magnitude from the existing research—both academic and non-academic—islikely attributable to a combination of factors.11 This includes a singular focus on federalpolicy and a relatively sparse regression model (when compared with the academicstudies) that appears to inadequately isolate the prevailing wage effect from otherdifferences in projects that receive and do not receive federal funding (e.g., additionaloversight by the U.S. Department of Housing and Urban Development), thereby inflatingthe estimated cost effect of labor policy.12,13

In sum, the current research on prevailing wage laws suggests that the policy likelyincreases construction costs on affordable housing. But the application of this research tomake projections about the Affordable New York Housing Program is complicated by thefact that its required compensation—$45 or $60 per hour depending on the location—issubstantially less than the wage and benefit requirements of federal and state prevailingwage laws for those areas. This renders direct comparisons to the effect of the federalDavis-Bacon Act—such as those made in the NYC IBO study—to be ineffective as costestimates of Governor Cuomo’s program.

It should not come as a surprise that prevailing wage laws likely have a different costeffect for affordable housing when compared with other areas of construction. There arelikely two critical reasons for this. First, Dunn, Quigley, and Rosenthal (2005) noted thataffordable housing construction requires less skill, has lower costs of materials, andfeatures a larger share of labor in total costs when compared with other publicly fundedprojects. This position is consistent with the behavior of high-wage contractors, who havetraditionally avoided residential construction projects; it is likely that these contractorshave found that high-wage workers are less cost-effective on residential properties whencompared to more complicated industrial or institutional projects. As a result, theassertions of Dunn, Quigley, and Rosenthal (2005)—combined with the near unanimous

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research on highways and institutional buildings (i.e., schools)—suggest that the positivecost effect of prevailing wage may be limited to affordable housing and related areas ofconstruction.

But there is another reason why prevailing wage laws might increase costs on affordablehousing projects: it significantly disadvantages contractors who rely on illegal, but cost-saving, employment practices to remain competitive. These are hardly isolated practices inthe construction industry. Audits by the New York State Department of LaborUnemployment Insurance Division between 2002 and 2005 revealed that 14.9 percent ofconstruction employers misclassified employees—nearly 50,000 of them annually—asindependent contractors (Donahue, Lamare, and Kotler 2007). Unscrupulous contractorsoften use this strategy as a means of evading legally required Social Security taxes andpayments to the state unemployment insurance fund, robbing workers of their rightfullyearned benefits and costing New York state tens of millions of dollars annually in lost UIfunding.

In addition to employee misclassification, numerous studies have shown that theconstruction industry in New York City is rife with contractors who engage in wage theft,hire undocumented labor, and ignore unsafe working conditions (Bernhardt, Spiller, andPolson 2013; Milkman, Gonzalez, and Ikeler 2012; Theodore, Valenzuela, and Melendez2006). These issues are especially relevant when discussing the effect of prevailing wagelaws on the construction costs of affordable housing; the Brennan Center for Justice(2007) noted that these illegal labor practices are especially concentrated in theresidential sector of the construction industry.

Prevailing wage laws help minimize these illegal labor practices. Consistent with similarlaws across the country, the Affordable New York Housing Program requires contractorsworking on state-funded projects to submit a project-wide certified payroll report; thisincludes employees’ names, Social Security numbers, pay rates, and number of hours. Theprospect of stringent government oversight of a project’s payroll provides a substantialdisincentive for contractors whose low-cost bids for public works rely on cutting corners intheir employment practices. At this point, there is not a definitive research study thatindicates whether the Affordable New York Housing Program will increase constructioncosts on state-funded affordable housing. But if it does, would it be worth it—economicallyand ethically—for the state government to repeal the program and instead save money byrewarding contractors whose lowest bids are predicated on illegal but cost-savingemployment practices?

Response to other studiesThe most advanced, sophisticated research on prevailing wage laws in the United Statesyields no evidence that state policy increases construction costs on two of New York’slargest public expenditures: highways and schools. This consensus among academiceconomists, however, has not deterred non–peer reviewed reports from claiming that NewYork’s prevailing wage law substantially increases public construction costs in the state.The Citizens Housing and Planning Council (Roistacher, Perine, and Shultz 2008)

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estimated that the state law increased construction costs by 25 percent. The Center forGovernmental Research (Gardner and Ruffer 2008) suggested that the law increasedconstruction costs between 19 percent and 55 percent depending on the region. Mostrecently, the Empire Center (McMahon and Gardner 2017) estimated that these regionaleffects were anywhere between 13 percent and 25 percent. In the context of the academicresearch, these cost estimates do not make much sense. If the most advanced researchsuggests that prevailing wage laws do not affect construction costs on the key drivers ofthe state’s construction budget, how are these reports generating such enormous costestimates?

A review of these three studies—and similar anti-prevailing wage articles published aroundthe country—reveals that these reports universally rely on variants of the same empiricalmethodology. This approach involves a simple two-step process that can best beexplained by example. Consider the 25 percent estimate offered by the Citizens Housingand Planning Council (Roistacher, Perine, and Shultz 2008). The first step in the process isto compare the per-hour compensation required by prevailing wage law to some arbitrary,lower wage and benefit level. The CHPC, for instance, estimated that the median unionconstruction worker in New York City earned 74 percent more in wages and fringebenefits than the median nonunion construction worker, an inflated and misleadingnumber given that union workers operate almost entirely in the higher-wagenonresidential sector of the industry. In the second step, this per-hour compensationdifferential is multiplied by the proportion of construction costs attributable to laborexpenses; the resulting product is touted as the “cost” of a state’s prevailing wage law.Given that the CHPC estimated that one-third of public projects’ construction cost wasattributable to labor, the authors multiplied 74 percent by 33 percent to produce their finalestimate: a 25 percent cost increase.

This approach is mathematically simple. But it also violates the laws of economics.

In any industry, an employer can minimize labor costs by either lowering the cost per houror by reducing turnover and/or the number of labor hours. Construction contractors are nodifferent. Some contractors minimize costs by following the first path, offering substandardwages and employing teams of relatively unskilled laborers. Other contractors pursue thelatter route, hiring and retaining the industry’s most productive workers at higher wagesand providing them with the most advanced equipment and technology. This is a well-known approach in labor economics called “efficiency wages”; in the retail industry, thisstrategy is what allows high-wage Costco and Wegmans to compete with low-wage Wal-Mart. Both paths can minimize costs, and it has been demonstrated convincingly that high-wage contractors in the construction industry are able to exploit these cost offsets to placebids on public construction projects that are competitive with—if not better than—those oflow-wage contractors (Atalah 2013a, 2013b).

With this background in mind, consider that the empirical methodology used by anti-prevailing wage studies relies entirely on a comparison between the prevailing wage andsome arbitrary lower wage. This demonstrates that, all else equal, prevailing wage lawsare associated with a higher hourly cost per worker. This may be true, but beware of thestraw man argument at play: the policy-relevant question is whether prevailing wage laws

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increase overall construction costs, not the hourly cost per worker. Studies using thisapproach ignore, or conveniently dismiss, high-wage contractors’ ability to minimize laborcosts in any other way besides reducing per-hour compensation; as an example, see thereport from the Empire Center (McMahon and Gardner 2017, 9). This represents asignificant methodological oversight that artificially inflates the cost estimates associatedwith the policy and violates the basic tenets of labor economics.

Given evidence that high-wage contractors in New York state employ more experienced,more educated and better trained workers (see Appendix B), it is unfortunate that thisflawed approach has already influenced public debate over prevailing wage laws in thestate. Part of this, however, may be due to a lack of clarity about the shortcomings of thismethodology. Given its prevalence among anti-prevailing wage studies, the CitizensHousing and Planning Council (Roistacher, Perine, and Shultz 2008) gave equal standingto the simple, two-step approach—which they deemed the “hypothetical” costmodel—when compared to the econometric, regression-based model employed in theacademic literature; the New York City Independent Budget Office (2016) laterincorporated the CHPC’s perspective into its report.

These two approaches, however, are not on equal standing among empirically rigorouseconomists and researchers. As outlined in Duncan and Ormiston (2018), the“hypothetical” approach—sometimes called the “wage differential” method—has beenwidely discredited in academic circles. As evidence, consider that there has not been asingle known research paper accepted for academic publication in the last 16 years thathas employed this simple approach in an evaluation of prevailing wage laws; everypublished study has instead relied on regression modeling. This latter approach ispreferred among researchers given that it evaluates overall construction costs in a mannerthat is agnostic about a contractor’s method of minimizing costs, thereby allowing anunbiased evaluation of the cost impact of state prevailing wage laws.

Conclusion: CostsThose opposed to prevailing wage laws have armed themselves with a simple, yetpowerful, political narrative that higher wages must mean higher construction costs. Theyhave supported their position with an equally simple empirical methodology that reliesentirely on the assumption that prevailing wage laws must increase taxpayer costs.Following this well-worn playbook, opponents in New York have used this simple ideologyto promise taxpayers hundreds of millions of dollars of savings if the state repealed thislong-established policy.

Simple arguments can produce politically powerful narratives. But cost estimates of stateprevailing wage laws based on opponents’ simple methodology is the economicsequivalent of trying to build a new hospital using only a hammer and a hand saw. As anyconstruction contractor or worker can appreciate, more complicated problems oftenrequire more complex tools. Fortunately, academic economists—using more advancedempirical tools—have made estimating the cost impact of state prevailing wage laws aresearch priority in recent years.

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When viewed through the lens of New York state’s capital budget, the most advancedresearch offered by these economists indicate that opponents’ estimated cost impact ofthe state’s prevailing wage law is substantially overblown. Peer-reviewed studies haveoffered clear evidence that these laws have no significant cost effect on the biggestdrivers of New York’s capital budget: highways and institutional buildings (e.g., schools).There is evidence that prevailing wage laws may increase construction costs on affordablehousing, but the effect may be limited to residential construction and the uniquecharacteristics of the Affordable New York Housing Program clouds the applicability ofexisting research to estimate the policy’s cost. In sum, when research on prevailing wagelaws is considered in the context of New York state’s capital budget, the results suggestthat the policy has minimal effect, if any, on public construction costs.

BenefitsRecent analyses of New York’s state prevailing wage law by the Center for Urban RealEstate (Vitullo-Martin 2012) and the Empire Center (McMahon and Gardner 2017) havefocused almost entirely on the presumed costs of the policy. This single-minded focus onconstruction costs—consistent with political campaigns to repeal state policies around thecountry—has altered the narrative about prevailing wage laws in a powerful way: it hasobscured all attention away from the benefits that these laws offer a state and itsresidents. That is unfortunate, as prevailing wage laws are one of the few, effective policylevers available to lawmakers to improve the standard of living of blue-collar workers,promote a skilled workforce, and provide an established pathway to the middle class forNew York residents without a college degree.

To expand the public narrative on prevailing wage laws in New York, this section willexplore how the policy improves the lives of the state’s residents. Given that there islimited academic research exploring the benefits of prevailing wage laws, this study willsupplement the analysis using government data and other available sources. To provide aframework to guide policy discussions, this study classifies benefits as belonging to one oftwo broad categories: “workers, families, and communities” and “Contractors andconsumers.”

Workers, families, and communities

Prevailing wage laws strengthen wages for blue-collarworkers

Political efforts to weaken or repeal state prevailing wage laws—in New York and acrossthe country—are implicitly rooted in the perspective that a state government should savemoney by paying blue-collar construction workers less. While the academic researchoffers evidence that prevailing wage laws generally do not increase public constructioncosts, economists have clearly demonstrated that the law is effective in improving workerwages. In the definitive study of the policy’s effect on construction labor markets, Kessler

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Table 1 Median hourly wage of blue-collar workers in New Yorkstate, by occupation, 2000–2016 (in 2016 dollars)

2000 2004 2008 2012 2016 2000–2016

Construction and extraction

Median wage $26.90 $26.61 $26.32 $26.02 $26.85 -0.2%

Employment 327,170 312,700 341,190 293,030 328,820 +0.5%

Installation, maintenance, and repair

Median wage $23.36 $23.44 $22.25 $22.50 $22.81 -2.4%

Employment 298,350 297,600 309,750 295,000 299,020 +0.2%

Transportation and materialmoving

Median wage $15.90 $16.77 $16.79 $16.47 $16.30 +2.5%

Employment 466,280 464,670 448,070 442,730 484,920 +4.0%

Production

Median wage $15.30 $16.03 $15.65 $16.00 $16.22 +6.0%

Employment 590,940 444,230 408,100 339,970 335,090 -43.3%

Note: Data are for four of the 23 major groups in the Standard Occupational Classification (SOC) system.SOC groups include all industries.

Source: Bureau of Labor Statistics, Occupational Employment Statistics (BLS OES various years)

and Katz (2001) estimated that the repeal of a state’s prevailing wage law results in a 2percent to 4 percent decline in the average hourly wage for its blue-collar constructionworkers on all projects, both public and private.14,15

Given these results, the ethical and financial implications of repealing or weakening NewYork’s prevailing wage law are enormous; for the average worker in the sector, a 3 percentreduction in the hourly wage would result in lost earnings approaching $2000 annually.16

By itself, this would devastate some New York workers and their families. But the pursuit ofa policy initiative that intentionally weakens the earning power of blue-collar workers atthis time seems unconscionable. As presented in Table 1, New York state residentsworking in blue-collar occupations across all industries have experienced stagnantpaychecks or scarce employment opportunities since 2000. This trend has beenespecially acute within the construction industry, as Figure A reflects that blue-collarworkers in this sector had their inflation-adjusted weekly earnings devastated by the run-up and aftermath of the Great Recession. While the New York economy grew by 28percent from 2000 to 2016 after accounting for inflation, these trends demonstrate thatthe state’s blue-collar workers have not shared in its prosperity. The prospect of a policyinitiative—repealing or weakening the state’s prevailing wage law—that further undercutsthe position of blue-collar New York state residents is economically and ethicallydisturbing.17

13

Figure A Average weekly earnings of blue-collar constructionworkers in New York state, adjusted for inflation,2001–2016

Note: Earnings are adjusted using Consumer Price Index for Northeast Region.

Source: Bureau of Labor Statistics, Current Employment Statistics (BLS CES)

$1,351

$1,127

$1,370

20102005 20151,100

1,200

1,300

$1,400

Prevailing wage laws stimulate the economy

One of the first lessons in any introductory macroeconomics course is that when workersearn higher wages, a region’s economy will grow. Not only does the worker (and theirfamily) improve their standard of living, but their subsequent spending of these gainsripples through the economy to create economic growth through the “multiplier effect.”This basic set of economic principles has been overlooked in previously publishedanalyses of New York’s prevailing wage laws.

This oversight is unfortunate, as the repeal or weakening of New York’s prevailing wagepolicy—and the subsequent reduction in worker wages in construction—would damagethe economic outlook for thousands of state residents, their families, and theircommunities. As an estimate, Table 2 analyzes New York’s blue-collar construction laborforce and the statewide earnings losses that would be attributable to the repeal of thestate’s policy. Given the findings of Kessler and Katz (2001), Table 2 examines how 2percent and 4 percent reductions in the average hourly wage of New York’s blue-collarconstruction workers would impact the state’s economy.

As presented in Table 2, it is estimated that blue-collar construction workers in New Yorkstate earned a total of $18.975 billion in earnings in 2016. If New York’s prevailing wagepolicy was repealed and the average industry wage fell between 2 percent and 4 percent,this would equate to earnings losses between $379.5 million and $759.0 million. Theseearnings losses would only minimally be offset by increased hiring attributable to lower

14

Table 2 Impact of repealing New York state’s prevailing wage lawon blue-collar construction workers and the local economy,2016 data

New York blue-collar construction

Total employment 294,591

Average weekly earnings $1,370.46

Average weeks worked (U.S. average) 47

Estimated total annual earnings (in billions) $18.975

Estimated changes if prevailing wage is repealed

Percent change in hourly wage -2% -4%

Percent change in employment 0.28% 0.56%

Change in annual earnings, across all current workers (inmillions)

-$379.5 -$759.0

Annual earnings, newly hired workers (in millions) $53.1 $106.3

Net change in annual earnings across current and new workers(in millions)

-$326.4 -$652.7

Notes: Blue-collar employment is estimated to be 79 percent of total industry employment (372,900) givendata from New York residents from the 2000–2016 Current Population Survey; the labor demand elasticityis -0.14.

The two data columns in the table represent the impact associated with the Kessler and Katz (2001) esti-mate that the repeal of a state’s prevailing wage law results in a 2 percent to 4 percent decline in the aver-age hourly wage for its blue-collar construction workers on all projects, both public and private.

Sources: Employment and earnings data come from the Bureau of Labor Statistics, Current EmploymentStatistics (BLS CES); Average weeks worked comes from Current Population Survey Annual Social andEconomic Supplement data in the IPUMS-CPS database (Flood et al. 2017). Labor demand elasticity forconstruction comes from from Maiti and Indra (2016).

industry wages, as Maiti and Indra (2016) estimate the wage elasticity of labor demand inconstruction is just -0.14. This would indicate that the earnings of newly hired employeeswould be between $53.1 million and $106.3 million.18 On net after repeal, aggregateearnings by blue-collar construction workers in New York state would decline by between$326.4 million and $652.7 million. This decline would not only distress New York stateresidents employed in these jobs, but their subsequent reductions in spending wouldripple through the state’s economy.19 Short of repeal, the earnings impact of policyweakening would depend on the particulars of the proposal; it is nevertheless obviousthat any policy movement in that direction would have a significant and deleterious effecton New York’s economy.

Prevailing wage laws increase tax revenues

Any statewide loss of income attributable to the repeal or weakening of the New York’sprevailing wage law will also result in lower tax revenues for state and local governments.Using the figures estimated in the previous section, Table 3 projects the additional state

15

Table 3 Estimated effect of New York’s state prevailing wage law onstate income and sales tax revenues from blue-collarconstruction workers, 2016

Assumptions and estimates (from Table 2)

Percent change in hourly wage 2% 4%

Net change in annual earnings, blue-collar construction workers (inmillions)

$326.4 $652.7

Sales tax

Average ratio of state sales tax to aggregate personal income,2011–2016

1.06% 1.06%

Estimated change in state sales tax, 2016 (in millions) $3.5 $6.9

Income tax

Average ratio of after-credits state tax liability to family income,blue-collar construction workers, 2000–2016

1.70% 1.70%

Estimated change in state income tax, 2016 (in millions) $5.6 $11.1

Total tax

Estimated change in state sales and income tax, 2016 (in millions) $9.0 $18.0

Notes: The two data columns in the table represent the impact associated with the Kessler and Katz (2001)estimate that the repeal of a state’s prevailing wage law results in a 2 percent to 4 percent decline in theaverage hourly wage for its blue-collar construction workers on all projects, both public and private.

Sources: Aggregate annual state sales tax data from the New York State Department of Taxation and Fi-nance. Aggregate personal income for New York state from the Bureau of Economic Analysis. Ratio of af-ter-credits state tax liability and family income for 2000–16 estimated from variables provided by the An-nual Social and Economic Supplement (ASEC) to the Current Population Survey.

sales and income tax revenues that are produced by the state’s prevailing wage policydirectly from the increase in net earnings among blue-collar construction workers in thestate. Given that a significant portion of New York state residents’ incomes are spent onitems exempt from the state sales tax (4 percent), this study estimates the increase in staterevenues from the sales tax by comparing the state’s annual sales tax revenues to itsaggregate level of personal income (via the Bureau of Economic Analysis) annuallybetween 2011 and 2016. That ratio—1.06 percent—has been stable year over year,indicating that the increase in the incomes for blue-collar construction workers in NewYork attributable to prevailing wage laws results in an additional $3.5 million to $6.9 millionin sales tax revenue.20 Given that the median local sales tax in New York is also 4 percent,it would be expected that prevailing wage laws would have a comparable impact on localtax revenue.

The progressive nature of New York state’s income tax system complicates efforts toproject the estimated tax effect generated by the prevailing wage law; there is notsufficient data to precisely identify the proportion of blue-collar construction workers ineach tax bracket. As a result, this study calculates the average ratio of state tax liability(after credits) to family income for New York’s blue-collar construction workforce from2000 to 2016 as provided by the Annual Social and Economic Supplement of the Current

16

Table 4 Poverty and government reliance of blue-collarconstruction workers in New York and in states with strongand weak prevailing wage laws, 2000–2016

Prevailing wage law

New Yorkstate

Strong/average

Weak/nolaw

Share below poverty line 8.36% 8.14% 10.68%

Share receiving earned income tax credit(EITC)

13.43% 13.97% 17.52%

Source: Annual Social and Economic Supplement (ASEC) to the Current Population Survey, 2000–2016

Population Survey. The resulting ratio (1.70 percent) is small, but it reflects that a sizeableproportion of the state’s construction workers earn poverty-level wages and subsequentlyhave a 0 percent effective tax rate. While there are many reasons to consider this aconservative estimate, this result suggests that New York’s prevailing wage law addedbetween $5.6 million and $11.1 million in income tax to the state’s revenues in 2016 fromblue-collar construction workers.21 Taken together, the results of Table 3 indicate that thestate’s prevailing wage policy added between $9.0 million and $18.0 million to New York’stax revenues last year.22

Prevailing wage laws reduce poverty

Blue-collar construction workers account for nearly 7 percent of New York state’s “workingpoor,” as there are an estimated 25,500 workers in the state employed in constructionwhose standard of living is below the poverty line.23 Substandard wages in some sectorsof the industry are exacerbated by regular unemployment stints due to insufficientconstruction demand because of the weather or the health of the economy. Repealing orweakening the state’s prevailing wage law will likely make this problem worse. Table 4shows that poverty among construction workers is far worse in states with weakened ornonexistent prevailing wage laws. In New York, the results indicate that 8.36 percent ofblue-collar construction workers were living below the poverty line. This is comparable tothe 8.14 percent among all states—like New York—with a “strong” or “average” prevailingwage law.24 However, in states with a “weak” or nonexistent prevailing wage law, 10.68percent of blue-collar construction workers live in poverty.

As would be expected, increased poverty rates by blue-collar construction workers inthese states lead to an expanded reliance on government subsidies. As demonstrated inTable 4, receipt of the earned income tax credit (EITC) is substantially higher by blue-collarconstruction workers in states with a weak or nonexistent prevailing wage law (17.52percent) compared with states with a stronger state policy (13.97 percent). To be clear,there may be other state-specific reasons to explain the differences in poverty ratesbeyond prevailing wage laws. But when paired with the findings of Kessler and Katz (2001),the results in Table 4 would logically suggest that the repeal or weakening of New York’s

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Table 5 Share of blue-collar construction workers withemployer-based benefits in New York and in states withstrong and weak prevailing wage laws, 2000–2016

Prevailing wage law

New Yorkstate

Strong/average

Weak/nolaw

Share with employment-based healthinsurance

40.35% 41.88% 30.41%

Share with employment-sponsoredpension plan

33.45% 35.69% 24.86%

Source: Annual Social and Economic Supplement (ASEC) to the Current Population Survey, 2000–2016

law would exacerbate poverty concerns for those employed in blue-collar constructionoccupations.25

Prevailing wage laws promote employment-based healthinsurance

In a time of instability in health insurance markets, state prevailing wage laws are one ofthe few public policies available to directly promote employment-based health insurance.Contractors working on state-funded projects are mandated under the law to compensateworkers with the prevailing rate of fringe benefits in the area. As demonstrated in Table 5,blue-collar construction workers in states with a strong or average prevailing wagelaw—including New York—have substantially higher rates of employment-based healthinsurance (41.88 percent) than comparable workers in states with weak or nonexistentpolicies (30.41 percent). Although there may be a number of contributing factors to thisoutcome, the compensation mandates included in state prevailing wage laws are directlyresponsible for at least part of this differential. Any weakening of New York’s prevailingwage law would therefore impose considerable social and economic costs on the workersand their families who would lose their health insurance as a result of this change in statepolicy.

Prevailing wage laws improve workers’ financial securityin retirement

In addition to health insurance, the fringe benefit package required of contractors workingon state-funded projects typically includes payments into an employer-sponsored pensionfund. As presented in Table 5, the mandates included in prevailing wage laws directlycontribute to higher rates of workplace pensions among blue-collar construction workersin states with a strong or average prevailing wage law (35.69 percent) when comparedwith states with a weak or nonexistent policy (24.86 percent). Increased wages attributableto prevailing wage laws also help workers accrue larger Social Security accounts, furtherstrengthening their retirement security. Finally, requirements that contractors working on

18

Figure A Share of high school–educated New York state residentswith a “good” job, 2000–2016

Note: A “good” job is defined as one offering earnings of $40,000 or more in inflation-adjusted 2016 dol-lars, employer-sponsored health insurance, and access to a workplace pension plan.

Source: Current Population Survey 2000–2016 data in the IPUMS-CPS database (Flood et al. 2017)

20.8%

13.9%

2000 2005 2010 201512.5

15

17.5

20

22.5%

state-funded construction projects must submit a certified payroll to regulators helpensure that employees will not be misclassified as independent contractors. Beingcorrectly classified as an employee requires the firm to pay the employer portion of SocialSecurity taxes. Increased financial security at retirement is of critical concern given thatblue-collar construction workers often retire with more physical limitations than those whowere employed in other sectors of the economy, and prevailing wage laws are one of themost effective policy levers that lawmakers can utilize to improve their economic situationupon retirement.

Prevailing wage laws offer a pathway to the middle class

Perhaps the most important characteristic of a thriving state economy is its ability to create“good jobs” for New York residents, or employment that features sufficient pay, healthinsurance, and a retirement plan. These middle-class jobs have long represented thebackbone of communities throughout New York state. But as workplaces have changed inrecent decades, New York state residents have increasingly discovered that the pathwaysto the middle class that were taken by their parents’ generation are no longer viable. Thisis particularly true for those without a college degree and, as Figure B demonstrates, hasbeen particularly acute since the turn of the century. Among New York state residents witha high school diploma but less than an associate degree, the proportion with a “good”job—defined as one with inflation-adjusted earnings of $40,000 or more, employer-sponsored health insurance, and a workplace retirement plan—declined sharply from 20.8percent in 2000 to just 13.9 percent in 2016.26

19

Table 6 Average earnings in fast-growing occupations for New Yorkstate workers with less than an associate degree

In New York state

Occupational group

U.S. occupationalgrowth

rate 2014–2024

Share of workers with lessthan associate degree,

2003–2016

Averageannual

earnings,2016

Health caresupport

23.0% 69.0% $30,540

Personal care andservices

13.2% 75.3% $29,870

Construction andextraction

10.1% 83.3% $62,960

Food preparationand serving

6.5% 84.2% $27,270

Installation,maintenance, andrepair

6.4% 75.1% $51,130

Building groundscleaning andmaintenance

6.2% 88.2% $33,660

Notes: The table examines six occupation groups that are fast-growing (as determined by estimatedgrowth rate in the occupation nationally from 2014 to 2024) and that, in New York state, are characterizedby having a high share (over 50 percent) of workers whose highest education level attained falls below anassociate degree. Workers with three years of college (but no degree) are not considered to have “lessthan” an associate degree and thus are excluded from this sample.

Sources: Annual Social and Economic Supplement (ASEC) to the Current Population Survey, 2003–2016;Bureau of Labor Statistics, Fastest Growing Occupations, 2014–2024; Bureau of Labor Statistics, Occupa-tional Employment Statistics, May 2016

The economic plight of non–college educated workers in New York is only projected toget worse, as most of the jobs that will become available to these individuals through2024 are likely to feature poverty-level wages or below. To demonstrate this, Table 6documents the six fastest-growing occupations on a national basis for which at least 50percent of job incumbents in New York do not have a post-secondary degree. The fastest-growing occupational category—health care support—is expected to feature brisk jobgrowth through 2024, however New York state residents in these positions earn anaverage income of $30,540. This isn’t enough to support a family, as the average salary inthese positions is so low that it would qualify a family of four for food stamps in New Yorkstate.27 Residents employed in the second-fastest growing occupation for the non–collegeeducated—personal care and services—earn an even lower income ($29,870). At theserates of pay, these are not the kinds of jobs that provide the personal and economicstability required for healthy New York residents, families and communities.

There are, however, occupations—such as construction—that offer non–college educatedworkers a clear pathway to the middle class. As outlined in Table 6, demand forconstruction workers is expected to grow by 10.1 percent between 2014 and 2024, withthe average New Yorker employed in the construction trades earning $62,960 as of last

20

year. These kinds of jobs are what can rebuild—literally—New York’s middle class.

New York state’s prevailing wage law is an important and effective policy lever that opensa pathway to the middle class for non–college educated residents. In addition to ensuringthat experienced construction workers earn a middle-class income and receive benefitson state-funded projects, state prevailing wage laws also incentivize contractors to hireapprentices enrolled in a state-sanctioned program, many of which only require a highschool diploma for admission. Under the law, contractors are able to compensateapprentices at a rate below the required prevailing wage. This motivates contractors toprovide opportunities for inexperienced workers to acquire the on-the-job trainingnecessary to develop into skilled tradespeople and the next generation of New York’sblue-collar middle-class. As highlighted by Bilginsoy (2005), Philips (1998) and Philips et al.(1995), repealing or weakening a state’s prevailing wage law will reduce apprenticeshipopportunities. In a time of limited middle-class job opportunities for non–college educatedNew York residents, this would be an egregious mistake in this economy that wouldfurther exacerbate the decline of the state’s middle class.

Contractors and consumers

Prevailing wage laws level the playing field forlaw-abiding contractors

The construction industry—both nationally and in New York—is populated by a widelydivergent set of contractors. On one hand, there are honest contractors who operate withtransparency, in accordance with the law, and with the goal of doing right by theiremployees and customers. On the other hand, there are also unscrupulous contractorswho engage in wage theft, exploit undocumented laborers, misclassify workers, evade taxpayments (e.g., Social Security), and ignore unsafe working conditions. Construction firmswhose profits depend on unethical actions are prevalent in New York (Bernhardt, Spiller,and Polson 2013; Donahue, Lamare, and Kotler 2007; Milkman, Gonzalez, and Ikeler 2012;Theodore, Valenzuela, and Melendez 2006), with many operating in sectors where thereare numerous opportunities to bid on publicly-funded projects (Brennan Center for Justice2007).

The illegal, cost-saving actions of these unethical actors put New York’s honest contractorsat a competitive disadvantage. The state’s prevailing wage law, however, helps level theplaying field. Under the law, contractors working on state-funded projects must submit aproject-wide certified payroll report that includes employees’ names, Social Securitynumbers, pay rates, and number of hours. The prospect of more stringent governmentoversight substantially discourages bids from contractors whose competitiveness isdependent on unlawful employment strategies. By rooting out unscrupulous contractors,prevailing wage laws help effectuate the moral obligation of state and local governmentsto prioritize the bids of honest, fair-dealing contractors whose workplace practices adhereto labor and employment law.

21

Prevailing wage laws improve workplace safety

Debate over public policy in the construction industry is complicated by its high rates ofworkplace injuries and jobsite fatalities; the industry was responsible for one in five job-related deaths in 2014.28 As lawmakers and construction consumers, government officialsin New York have an ethical responsibility to ensure that state residents are not undulyimperiled while working on public projects. While prevailing wage laws typically do notinclude safety requirements, the elimination of low-road contractors from bidding on publicprojects results in an increased reliance on high-road contractors with a greatercommitment to workplace safety and worker training.

The relationship between state prevailing wage laws and increased worker safety hasbeen demonstrated in a series of research studies. In the most advanced, peer-reviewedarticle to date, Azari-Rad (2005) used data from the Survey of Occupational Injury andIllness between 1976 and 1999 and found that nonfatal injury rates were 7 percent to 10percent lower in states with prevailing wage laws. These results are supported by a pair ofunpublished studies that showed that states with prevailing wage laws exhibit lowerfatality rates in construction (Dickson Quesada et al. 2013) and decreased rates ofdisability among construction workers (Philips 2014). While the safety impact may beindirect, the research offers clear evidence that New York’s prevailing wage law effectivelyadvantages high-road contractors whose commitment to safety helps minimize workplaceinjuries to residents working on state-funded construction projects.29

Prevailing wage laws advantage local contractors

Those opposing prevailing wage laws have long relied on an unsubstantiated claim thatthe policy reduces bid competition on public projects (e.g., Leef 2010). Two recentacademic studies have suggested that this claim is inaccurate. In an analysis of 140municipal projects in California in 2006 and 2007, Kim, Kuo-Liang, and Philips (2012) foundno evidence that the absence of prevailing wage laws increased the number of bidders,nor that contractors changed their bidding strategy based on whether a project requiredprevailing wages to be paid.30 Duncan (2015a) found similar results in a study of 132highway resurfacing projects in Colorado, as the presence or absence of prevailing wagerequirements had no effect on the number of bidders.31

The results of these two studies demonstrate that, on net, prevailing wage laws do notaffect the number of contractors bidding on public projects. But additional evidencesuggests that prevailing wage policies may substantially advantage local, in-statecontractors in the bidding process. In a non-academic review of 110 Ohio schoolconstruction projects open to bid between 2013 and 2016, Onsarigo et al. (2017)discovered that out-of-state contractors submitted the lowest bid on 21 percent (16 of 77)of projects that were not covered by prevailing wage law. In comparison, out-of-statecontractors won just 3 percent (1 of 33) of the bids for projects that required prevailingwages to be paid. The effect of prevailing wage laws to advantage local contractors hasyet to be examined in the academic press, however the results of Onsarigo et al. (2017)are consistent with the reasons why some prevailing wage laws were originally enacted. In

22

addition to ensuring minimum labor standards, prevailing wage laws—including the federalDavis-Bacon Act of 1931—were designed to protect local contractors from being undercutby out-of-state firms relying on low-cost, low-road employment strategies that erode locallabor market conditions (Gujarati 1967).

Prevailing wage laws develop a skilled workforce

Contractors have bemoaned skill shortages in the construction trades for decades (e.g.,Weinberg 1969). The basic laws of supply and demand suggest that bona fide skillshortages in a particular region can typically be resolved by increasing wages. Inconstruction, however, contractors are more often inclined to employ an alternativestrategy when dealing with a perceived short-term skill shortage: recruiting and employingavailable out-of-region workers. This represents a missed opportunity for policymakersinterested in generating new jobs for local residents, and the repeal of the state’sprevailing wage law—and the corresponding decline in industry wages—would onlyexacerbate the problem.

Perceived skill shortages in the industry may exist because of the cyclical and seasonalnature of construction work and the resulting instability of the employment relationship.For many contractors, workers hired during times of high construction demand are quicklyjettisoned once demand slows. This loose attachment between worker and employersuppresses the incentives for many contractors to incur the costs of training. Employerscannot ensure that they will retain employees that have benefited from potential traininginvestments, and are discomforted by the likelihood that these workers will eventually beemployed by competing contractors. Given frequent spells of unemployment (combinedwith relatively low wages in entry-level positions), individual workers often have insufficientresources to incur the costs of training themselves. In sum, the cyclical and seasonalnature of construction may lead to a less than optimal level of training in the industry.

State prevailing wage laws are one of the few effective policy levers available tolawmakers to increase the number of skilled workers in construction. The policy’scompensation exemption for apprentices incentivizes contractors—both union andnonunion—to hire a fixed number of relatively inexperienced workers admitted to a state-sanctioned apprenticeship program to work alongside more skilled, experienced workerson a job site; this on-the-job training is critical for workforce development. The promotionof apprenticeship programs is amplified by state prevailing wage laws in other ways. Forunion contractors, a portion of most unions’ hourly compensation package sets aside aper-hour portion to be contributed to a joint union-management apprenticeship trainingfund that supports classroom instruction that trains the next generation of tradespeopleavailable to all union contractors. Nonunion contractors seeking to bid on prevailing wageprojects require a sufficiently trained workforce whose productivity and skill make higherwages economically viable and allow them to be competitive with union firms thattraditionally have employed better-trained workforces. To incentivize this caliber of firm-based training and development, nonunion contractors require access to a sufficientnumber of projects requiring these skills unavailable to low-road, rival contractors; thisensures they will maintain enough labor demand to continue the employment of their

23

skilled workforce and reap the benefits of training investments.

Prevailing wage laws improve quality and on-timecompletion

The singular focus of public debate on construction costs ignores two other criticalconstruction outcomes: quality craftsmanship and on-time completion. Poorly constructedbridges and long-delayed school openings can have disastrous consequences for NewYork families and communities. To date, most experts posit that prevailing wagelaws—through its advantaging of high-road contractors employing the industry’s mostskilled workers—lead to better construction quality and greater on-time completion (e.g.,Philips 2014; Kelsay 2016). While these conclusions may follow logically from the otherdemonstrated benefits of prevailing wage laws, it should be noted that a lack of availabledata on quality and timeliness have limited academic researchers from empiricallyevaluating these hypotheses.

Conclusion: BenefitsThe single-minded focus on costs by the Center for Urban Real Estate (Vitullo-Martin 2012)and the Empire Center (McMahon and Gardner 2017) has altered the public narrativeabout New York’s state prevailing wage law by obscuring the benefits that these lawsprovide to the state’s residents and communities. That is misguided, as there isconsiderable evidence that prevailing wage laws improve the standard of living for blue-collar workers, improve workplace safety, advantage in-state contractors, minimize illegalemployment practices, develop worker skills, and provide a pathway to the middle classunavailable in other sectors for state residents without a college degree. Those whoignore the benefits of prevailing wage laws in framing public debate are, at best, offering aone-sided, incomplete depiction of the policy that does a disservice to New York’s blue-collar workers and the communities in which they reside.

Concluding discussionThose seeking to repeal or weaken state prevailing wage laws have been incrediblyeffective in recent years in shaping public and political opinion. Their approach has reliedon (a) a singular focus on the costs of the policy and (b) an argument—higher wages meanhigher taxpayer costs—whose simplicity and intuitiveness seems to powerfully resonatewith lawmakers and residents alike. Opponents of prevailing wages have exploited thisnarrative in campaigns across the country, successfully convincing lawmakers to repealstate prevailing wage laws in Indiana (2015) and West Virginia (2016) and politically oreffectively weaken these laws in many other states across the country.

But there is a fundamental problem with the simple narrative that prevailing wage lawsincrease costs: the statistical evidence says otherwise. The cost of state prevailing wagelaws has been a considerable focus of independent, academic economists over the last 15

24

years. In study after study, the results demonstrate a clear consensus: state prevailingwage laws have not been shown to increase taxpayer costs on the biggest components ofstate construction budgets (roads and schools). If this seems counterintuitive, consider thathigh-wage contractors employ the most skilled and most productive workers and use theindustry’s most advanced technology and equipment; this allows them to place bids onpublic construction projects that are competitive with—if not better than—those of low-wage, low-skill contractors. Essentially, state lawmakers “get what they pay for” when itcomes to hiring contractors and workers to build public construction projects.

There is another fundamental problem with the current narrative on state prevailing wagelaws: it entirely ignores the many benefits that the law provides a state’s residents andcommunities. In a time when economic opportunities for blue-collar workers are slippingaway—devastating families and communities—prevailing wage laws are one of the feweffective policies available to state lawmakers that increase the standard of living for theseworkers, incentivize employers to provide opportunities for training and skill development,and offer a clear pathway to the middle class for non–college educated state residents.Prevailing wage laws also advantage in-state and law-abiding contractors, reduce illegalemployment practices, and improve workplace safety for a state’s residents. Any publicdiscussion about state prevailing wage laws that ignores the benefits of the policy does anincredible disservice to a state’s workers, families, and communities.

It is acknowledged that, in discussing New York’s prevailing wage policy, state lawmakersare faced with two ethical obligations that, on the surface, appear to be mutually exclusive:the need to minimize taxpayer costs against the responsibility of ensuring fair wages,benefits, and working conditions for its residents on public construction projects. From areview of the current academic research, it would appear that New York’s prevailing wagelaw potentially offers policymakers the opportunity to fulfill both responsibilities. On thebiggest components of the state’s construction budget, the consensus of academicstudies would be that the policy has little to no effect on taxpayer costs. There is alsoconsiderable evidence that the policy raises the standard of living of a state’s residents,improves workplace safety, and offers a clear path to the middle class for New York stateresidents without a college degree. In sum, research by independent, academiceconomists suggests that New York’s prevailing wage law is a uniquely valuablecomponent of state policy that simultaneously uplifts residents and communities whileimposing little, if any, cost on taxpayers.

Response to Empire CenterThis report would be remiss without directly addressing the points raised by the EmpireCenter, which published a 2017 report (McMahon and Gardner 2017) critical of the state’sprevailing wage law and proposing a series of amendments to substantially weaken thepolicy. First, the authors generate cost estimates of New York’s policy using a variant of thewidely discredited “hypothetical” approach discussed earlier in this paper. By comparingthe level of prevailing wage with some arbitrary, lower wage level, the Empire Center doesdemonstrate that prevailing wages may increase labor cost per hour on some projects, if itassumes that the state government would have used a low-wage contractor instead of a

25

high-wage contractor. But the authors commit a significant logical fallacy in blindlysuggesting that this equates to showing that prevailing wages would increase totalconstruction costs. “Efficiency wages” are a basic concept in labor economics, as itexplains how firms using a high-wage, high-skill workforce can effectively compete withfirms that employ low-wage, low-skill workers; in essence, this is how Costco andWegmans are able to compete against Wal-Mart in the grocery industry. Within theconstruction industry, the productivity differential between high-skill and low-skillconstruction workers is substantial (Atalah 2013a, 2013b), which makes the authors’explicit dismissal of productivity differences (McMahon and Gardner 2017, 9) to be, at best,puzzling.

Lawmakers and residents should also be clear-eyed that many of the Empire Center’sbasic arguments against the state’s prevailing wage law—beyond a cost estimate thatrelies on a discredited methodology—have little to do with the actual law itself. Instead, itseems that the authors’ strategy to undermine state policy is to explicitly connect the lawto New York’s construction unions—evidenced, in part, by its cartoonish cover—and then,by proxy, discredit the policy by disparaging the unions. Besides the use of simplemisdirection, this approach conceals two more logical fallacies. First, it is not clear thatmany of these critiques have any relationship with prevailing wage or construction costs.The Empire Center criticizes unions’ work rules and underfunded pensions, but increasedjob security stipulations and pension contributions are typically offset in collectivebargaining through lower wage requirements.32 Second, and perhaps more importantly,the authors’ arguments rely on their implicit narrative that union contractors—and onlyunion contractors—bid on prevailing wage projects (pg. 7). This is simply untrue. In fact, inthe study of prevailing wage laws in California, Kim, Kuo-Liang, and Philips (2012) foundthat 26 percent of bidders on prevailing wage projects were nonunion contractors.Duncan (2015a) found similar results in Colorado, and there is nothing to suspect thatthings would be markedly different in New York state. Much of the Empire Center’sargumentation relied on the assumption that prevailing wage projects were the explicitdomain of construction unions; evidence to the contrary calls into question their approachand, as a result, their conclusions.

About the authorsRussell Ormiston is associate professor of economics at Allegheny College and researchscholar for the Institute for Construction Economic Research. Dale Belman is professor oflabor relations and human resources at Michigan State University and president of theInstitute for Construction Economic Research. Matt Hinkel is a Ph.D. Student, LaborRelations and Human Resources, Michigan State University.

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AppendixA

Estimation of union–nonunion wage differentials forblue-collar construction workers, Colorado and New Yorkstate, 2000–2016

Variable Coefficient t-statistic Significance

Union differential by state

Union member 0.143 1.74 90%

New York state -0.061 -1.50 —

Union member ∗ New York state 0.052 0.57 —

Occupation

Electrician 0.111 1.97 95%

Plumber/pipefitter 0.140 2.15 95%

Carpenter 0.022 0.46 —

Operating engineer 0.003 0.04 —

Laborer -0.141 -2.90 99%

All other occupations Base — —

Education

No high school diploma -0.188 -4.14 99%

High school diploma, no college Base — —

Some college, no degree 0.157 2.95 99%

Associate degree or vocational program 0.221 3.25 99%

Bachelor’s degree or higher 0.152 2.25 99%

Demographics

Age 0.008 5.44 99%

Male 0.183 1.69 90%

Veteran -0.168 -2.63 99%

Noncitizen -0.061 -1.27 —

Year indicators (2000–2016) Included

Number of observations 498

R-squared 0.3624

F-statistic (31, 466) 8.26

Source: Authors’ analysis of data from Current Population Survey Outgoing Rotation Group, 2000–2016

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AppendixB

Comparison of age and education, high-wage andlow-wage blue-collar construction workers, New York state,2000–2016

Variable UnionNonunion

(wage ≥ $20) Nonunion (wage < $20)

Median age 42 39 36

Percent with high school diploma 86.0% 82.1% 65.9%

Percent with college degree(2-year or 4-year)

12.3% 19.9% 9.7%

Number of observations 171 156 123

Source: Current Population Survey Outgoing Rotation Group, 2000–2016

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Endnotes1. The New York State Fiscal Year 2018 Enacted Capital Program and Financing Plan can be

accessed at: https://www.budget.ny.gov/budgetFP/enactedfy18.html.

2. Bids for federally funded interstate projects also had to adhere to the requirements of theDisadvantaged Business Enterprise Program. However, given that the results of the study showedthat the policies collectively had no effect on cost, it is highly unlikely that this latter policy isoffsetting an undetected cost increase attributable to prevailing wage law.

3. The only other recent study of the effects of prevailing wage laws on transportation spending wasVitaliano (2002). Using data on all 50 states from 1996, the author used a sparse, six-variableregression model to link the presence of a state prevailing wage law with total expenditure by therespective state’s department of transportation. While the results suggest that prevailing wageincreases state costs by 8 percent, the approach failed to include the most critical variables thatpredict total expenditure, such as the level of law enforcement staffing, number and scope ofprojects ordered, and so on. This debilitating omitted variable bias substantially weakens thepaper to the point that it has questionable validity as a part of public policy discussion.

4. Concerns about the applicability of Colorado research to New York markets are attenuated by thefact that the two states seemingly have a comparable wage differential between high-wage andlow-wage contractors, as presented in Appendix A. Given that data on individual contractors is notpublicly available, this report instead used data from the Outgoing Rotation Group of the CurrentPopulation Survey between 2000 and 2016 to compile a reasonable sample size of blue-collarconstruction workers from Colorado and New York (n=498). Proxying union members as employedby high-wage contractors and nonunion members to be working for low-wage contractors, theresults of a regression model on workers’ hourly wage does indicate that union members, asexpected, are paid more (14.8 percent) on an hourly basis. However, the results indicate the uniondifferential in New York is statistically indistinguishable from that of Colorado. While this approachis rife with caveats—e.g., the sample cannot separate residential from nonresidential workers, itrelies on workers’ state of residence and not state of employment—it represents the bestapproach to compare the wage differential between high-wage and low-wage contractors acrossthe two states. The results of the regression—and the nonsignificance of the union-stateinteraction term—offer preliminary evidence that contractors in New York state should be able tosubstitute low-wage workers with high-wage workers at a similar rate to those featured in theresearch on Colorado.

5. A complete summary of these studies is provided in Duncan and Ormiston (2018). The fiveacademic articles are Bilginsoy and Philips (2000); Azari-Rad, Philips, and Prus (2002, 2003);Vincent and Monkkonen (2010); and Duncan, Philips, and Prus (2014). The four non-academicstudies are: Prus (1999), the Ohio Legislative Service Commission (2002), Kelsay (2016), andOnsarigo et al. (2017).

6. The lone dissenting study—Vincent and Monkkonen (2010)—found results linking state prevailingwage laws to higher school construction costs, however their approach has been questionedgiven their failure to control for the cost effect of local economic conditions (Onsarigo et al., 2017).

7. The Ohio Legislative Service Commission (2002) report posited that the school constructionexemption in the state’s prevailing wage law saved the state 10.7 percent; however this estimatewas derived from three regression models in which none of the prevailing wage coefficients were

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even close to conventional levels of statistical significance. The decision to explicitly dismissconcerns over statistical significance is at odds with normal statistical practice as found inintroductory econometrics textbooks, and has been criticized in multiple subsequent reports(Onsarigo et al. 2017; Duncan and Ormiston 2018).

8. In a follow-up study, Atalah (2013b) employed the same data set and approach but insteadcompared union and nonunion bids within each trade. While within-trade samples tended to besmall, the study found no statistically significant difference between bids from union and nonunioncontractors in 13 of the 18 trades studied. Of the five trades where there was a significantdifference, three featured higher bids from union contractors while two demonstrated higher bidsfrom nonunion contractors.

9. Dunn, Quigley and Rosenthal (2005) used two different types of regression methods—ordinaryleast squares and instrumental variables—to study the effect of prevailing wage laws on theconstruction costs of affordable housing. Under OLS, which was used by the NYC IBO study, theauthors suggested that the cost effect was between 9 percent and 11 percent. Using instrumentalvariables, Dunn, Quigley and Rosenthal (2005) estimated that the cost impact was between 19percent and 37 percent, however this approach was heavily critiqued by Mukhopadhyay, Harrisand Wiseman (2013) and Littlehale (2017) for its use of weak first-stage instruments that inflatedthe estimates.

10. The Minnesota Office of the Legislative Auditor (2007) critiqued Dunn, Quigley and Rosenthal(2005) for their failure to consider the role of HUD requirements, thereby suggesting that theirestimates may also be inflated. While the failure to properly control for other federalrequirements—beyond prevailing wage—may complicate the research on affordable housingconstruction costs, these concerns are not as applicable when examining research on highwaysand schools. For the former, Duncan (2015a) specifically notes that the building specifications ofstate and federal highways are identical with two exceptions: federal prevailing wage and therequirements of the Disadvantaged Business Enterprise Program. In regards to schools, manystudies examine the cost impact of prevailing wage by looking at costs before and after the onsetor repeal of prevailing wage (e.g., the exemption of schools from Ohio’s prevailing wage law in1997); this would minimize the influence of changes in complementary public policies.

11. While not published in academic press, a collection of California government agencies prepared astudy that collected data on 400 affordable housing projects in the state from 2001 to 2011(California Department of Housing and Community Development et al. 2014). Using regressionanalysis, the study estimated that prevailing wage laws increased construction costs by 11 percent,however the authors noted that the size and statistical significance of this estimate wereparticularly sensitive to the specification of the model.

12. Excluding year and region fixed effects, the NYC IBO study featured nine variables; in contrast,the two academic papers featured models that included nearly three times as many variables.Many of the variables included in the academic studies—but not in the NYC IBO report—werestatistically significant, This includes, but is not limited to, data on profit/nonprofit status of thedeveloper, architecture and engineering costs, parking characteristics (not just a dummy variableindicating whether parking was a part of the project), total number of units in the structure (not justthe number of affordable units), and nonresidential components of the project.

13. A subsequent, non-academic study by Yildirim and Lee (2016) used the same methodologyemployed by the NYC IBO study to estimate how prevailing wage laws affect construction costs inaffordable housing across each of New York City’s five boroughs for the same time period (2010through 2015). The study’s reliance on the same regression model, however, exposes it to thesame concerns as the NYC IBO paper.

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14. While Kessler and Katz (2001) find that hourly wage declines are more concentrated among unionworkers following the repeal of a state’s prevailing wage law, their results demonstrate that wagesfor nonunion workers do not increase as a result.

15. Estimates between 2 percent and 4 percent provide conservative projections. In contrast, Kelsay(2016) cites a series of studies to use projections between 3 percent and 5 percent.

16. According to the Bureau of Labor Statistics, the average “production” worker in the constructionindustry earned $36.16 per hour and worked 37.9 hours per week in New York during 2016. Whilethe BLS does not provide the average number of weeks worked—a critical issue given the on-again, off-again nature of construction employment—a 50-week work-year would result in theaverage blue-collar construction losing $2,056 assuming a 3 percent reduction in the hourlywage.

17. According to the Bureau of Economic Analysis, the real GDP for New York state in 2000 was$1,161.4 billion (2016 dollars). In 2016, the BEA estimated the state’s real GDP to be $1,488.0 billion,indicating a growth rate of 28.1 percent since 2000.

18. The conclusion that newly hired workers would earn between $53 million and $106 million isbased on the assumption that these workers would be paid the industry average hourly wage. Inall likelihood, new hires would be paid much lower, entry-level wages. Projections based on theindustry average, however, are used as a means of being conservative in the estimates of theoverall economic impact of the state’s prevailing wage law.

19. There are numerous reasons to believe that these estimates may be conservative. First, Onsarigoet al. (2017) discovered that bidding by out-of-state contractors substantially increased on Ohioschool projects after the state excluded schools from prevailing wage. While this was based on asmall sample (n=110) and was not a part of a peer-reviewed study, any increase in out-of-statecontractors would take jobs—and income—away from New York workers, thus exacerbatingearnings losses attributable to a potential repeal of the state policy. Second, in a non-academicstudy, Philips (2014) suggested that the decline in the average hourly wage of constructionworkers following the repeal of a state’s prevailing wage law may approach 8 percent; if that istrue, that would nearly double the maximum earnings impact estimated for New York’s law in Table2.

20. Using the aggregate state ratio of sales tax revenues to income in New York represents aconservative estimate of how earnings losses among New York’s blue-collar construction workerswould affect state tax revenues. Given differences in marginal propensities to consume and save,high-income New York state residents likely devote relatively less of their aggregate income tosales tax when compared with most blue-collar construction workers.

21. Kessler and Katz (2001) outlined that high-wage employees are likely to experience moreextreme income losses following the repeal of a state’s prevailing wage law when compared withlow-wage employees. Given the progressive nature of New York’s income tax structure, it is likelythat the income tax estimates in Table 3 underestimate the annual effect. Further, a considerablepercentage of New York’s blue-collar construction workers featured in the Annual Social andEconomic Supplement of the Current Population Survey were estimated to have negative effectivetax rates. Since it is highly unlikely that additional workplace income would further decrease thetax burden for these workers as the negative ratio would indicate, some thought was given toreplacing those negative rates with zeroes in the calculation (the aggregate ratio increases from0.0170 to 0.0198 as a result). However, given the existence of the Earned Income Tax Credit (EITC)and in the interest of keeping the estimates conservative, this study used the lower (0.0170) rate.

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22. The emphasis on state and local taxes ignores the additional monies received by the federalgovernment as a result of New York’s prevailing wage law, including income tax and workplacepayments into Social Security and Medicare.

23. Using the 2000 to 2016 Annual Social and Economics Supplement (ASEC) to the CurrentPopulation Survey, workers in the construction industry accounted for 6.84 percent of individualswho were employed and were deemed to be below the poverty line. According to the Bureau ofLabor Statistics Current Employment Statistics program, there were 372,900 workers employed inconstruction in New York state in 2016. The resulting estimate—25,500—may be conservativegiven that the CPS likely undercounts low-paid, undocumented workers employed in construction.

24. The “strength” of a state’s prevailing wage law was originally introduced by Thieblot (1995). Thisscoring system classifies state policies on the basis of five categories—minimum contractthreshold, contracts covered, enforced wage rate, breadth of work covered, and an “other”category—and awards points based on established criteria. Thieblot (1995) classifies “strong” lawsas those with 12+ points, “average” laws as those with 7–11 points and “weak” laws as those with1–6 points. Belman, Ormiston, and Petty (2017) used these guidelines to reevaluate stateprevailing wage laws in 1979, 1994, and 2006. For this report, the 2006 scores are used tocategorize states.

25. To date, there has not been an academic study that has attempted to isolate the effect ofprevailing wage laws in predicting poverty rates among blue-collar construction workers. But in astudy of Ohio’s prevailing wage law, Onsarigo et al. (2017) used a cross-sectional regression modelto demonstrate that, on a national level, states with a weak or nonexistent prevailing wage lawhad 3.1 percent higher poverty rates than states with a strong or average law.

26. Wage and salary income is measured in 2015 US dollars.

27. See https://otda.ny.gov/programs/snap/#eligibility.

28. Fatalities in construction represented 20.5 percent of all fatalities in private industry and 18.6percent of total fatal injuries in 2014. See “Fatal Occupational Injuries by Industry and Event orExposure, all United States, 2014” via the Bureau of Labor Statistics at http://www.bls.gov/iif/oshwc/cfoi/cftb0286.pdf.

29. The positive safety impact of prevailing wage laws are indirectly supported by an overwhelmingamount of research demonstrating that union jobsites are substantially safer than nonunionjobsites. For example, Zullo (2011) finds that fatalities in the construction industry are lower instates with greater union density. Miller et al. (2013) demonstrate that nonunion contractorscommit significantly more OSHA violations than their union counterparts in Missouri. Better safetyrecords among union contractors is the result of a number of factors, including better workertraining (Bilginsoy 2005), more stringent awareness and enforcement of OSHA requirements atunion worksites (Weil 1992) and a workplace culture that more greatly emphasizes safety concerns(Gillen et al. 2002).

30. While California state prevailing wage laws govern state and locally financed public projects,“charter cities” are able to choose to exempt themselves from paying prevailing wage rates (Kim,Kuo-Liang, and Philips 2012). This led the authors to be able to compare projects built underprevailing wage provisions and those projects that were exempt from the law.

31. If prevailing wage laws discourage some low-road contractors from bidding on a public project,the results of Kim, Kuo-Liang and Philips (2012) and Duncan (2015a) would indicate that either (a)the reduction in the number of bids by low-road contractors is sufficiently small so as to not be

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statistically significant or (b) this reduction is offset by increased bidding from other high-roadcontractors.

32. On page 16 of its report, the Empire Center implicitly suggests that New York’s prevailing wagelaw is racially discriminatory given that it advantages labor unions. The Empire Center’s impliedposition is contradicted by a volume of academic-caliber studies that has thoroughly debunkedthe hypothesis that state prevailing wage laws have any discriminatory effect (Kessler and Katz2001; Azari-Rad, Philips, and Prus 2003; Belman 2005; Manzo, Duncan and Lantsberg 2015;Belman, Ormiston, and Petty 2017). Further, in a non-academic examination of the data on NewYork City construction workers from the Bureau of Labor Statistics, Mishel (2017) demonstrates thatclaims that New York’s unions are discriminatory are historically anachronistic; as an example,African-Americans were more represented in the union construction workforce (21.2 percent) thanthe nonunion sector (15.8 percent) between 2006 and 2015.

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